| The Sarbanes-Oxley Act was passed in 2002 and is | | | | industry to go after untapped resources – one of |
| also known as the Public Company Accounting | | | | which is women who may have recently left work, or |
| Reform and Investor Protection Act of 2002. It is | | | | who are contemplating leaving the workforce, to have |
| called the Sarbanes-Oxley Act after Senators Paul | | | | a family. More firms are now offering flexible work |
| Sarbanes (D-Md) and Michael Oxley (R-Oh). The | | | | arragements to accomdate the needs of this |
| legislation introduced major changes to the regulation | | | | group”(Boodoo, 2007). |
| of financial practice and corporate governance ( An | | | | It also says “the Sarbanes-Oxley Act has provided |
| argument against the Sarbanes-Oxley Act is that it | | | | corporate boards an incentive to seek diverse |
| may be too costly. Some would argue that it does | | | | directors who are people of color and women” |
| more economic harm than economic good. The Act | | | | (Boodoo, 2007). |
| established the Public Company Accounting Oversight | | | | This all raises the question is this too costly? According |
| Board, which is charged with overseeing, regulating, | | | | to Sean Nolan in his article, “Planner: Calculating |
| inspecting, and disciplining accounting firms in their roles | | | | Costs of Sarbanes-Oxley Compliance”, AMR |
| as auditors of public. | | | | Research estimates that Fortune 1000 companies will |
| As many know, Enron was a company based in | | | | spend $2.5 billion on Sarbanes-Oxley compliance this |
| Houston, Texas. They filed for bankruptcy after it was | | | | year. The opportunity cost is something that must be |
| revealed that its reported financial condition was | | | | thought of here. Is it more important to save money by |
| comprised of creative accounting fraud. This event | | | | not complying with Sarbanes-Oxley, or is it more |
| destroyed many people’s lives. Employees lost all | | | | important to protect people from accounting fraud |
| they put into the company. This is one of the events | | | | among many other things Sarbanes-Oxley protects |
| that made the US Congress implement the | | | | against? Obviously the Sarbanes-Oxley Act is a very |
| Sarbanes-Oxley Act to protect companies from | | | | important law enforced by US Congress. It protects |
| performing accounting scandals. | | | | people from being put into horrible situations such as |
| Maria and Crystal Boodoo’s article “Peering into | | | | Enron or WorldCom. The positive outcomes of this |
| the Fog The Emerging Consequences of | | | | law greatly outweigh the negative outcomes. |
| Sarbanes-Oxley”, begins by talking about how | | | | Company owners are losing money by following the |
| costly the Act actually is for companies. Ther article | | | | act, but I feel the US society really needs this act. No |
| says, “Companies required an average of 22,786 | | | | one, at any cost, should have to go through what |
| people hours internally to complay with | | | | employees and shareholders of Enron and WorldCom. |
| [Sarbanes-Oxley] in 2005” (Boodoo, 2007). The | | | | People lost their savings and their money because |
| article also said, to comply with Sarbanes-Oxley major | | | | CEO’s and accountants of a company decided to |
| corporations spent about $3.8 million in 2006. Not to | | | | skim money and lie to shareholders. While I agree that |
| mention opportunity costs of management which is | | | | not everyone should have to pay for the mistakes |
| now distracted (Boodoo, 2007). However, with all | | | | made by Enron or WorldCom, it is important this Act |
| these costs the article states, “The costs of | | | | still be implemented because they have tarnished the |
| Sarbanes-Oxley are very real and tangible, but the | | | | names of accountants. Since the Act is preventing |
| potential benefits that may be materializing are often | | | | people from skimming money off of companies it must |
| intangible and societal in nature” (Boodoo, 2007). | | | | be kept in order. Also, if the company is opening up |
| This quote is very true, it may cost companies money, | | | | jobs for people of color and women it is important. |
| but it is important for society as a whole to be | | | | Diversity in the workplace is an important part of the |
| protected from scandals like Enron and WorldCom. | | | | future. Also, since it fights against corruption, money |
| The article also goes on to say, “Sarbanes-Oxley is | | | | laundering, and terrorist financing, it is clearly important. |
| not what motivates investors to enter the stock | | | | These illegal things should be put to rest, and anything |
| market. But it is possible that without Sarbanes-Oxley, | | | | companies can do to make sure of it would be really |
| more people could have stayed away from | | | | important. It is also a plus for stockholders. More people |
| investing….The symbolic act of Sarbanes-Oxley may | | | | are investing in companies with the confidence that |
| have helped to quell public concerns” (Boodoo, | | | | something like Enron or WorldCom won’t happen. |
| 2007). Sarbanes-Oxley also helps in the fight of | | | | Basically, regardless of how costly the |
| corruption and money laundering. The article says, | | | | Sarbanes-Oxley Act is, it is an important part of |
| “Through Sarbanes-Oxley, companies have | | | | American coporations now. |
| become a first line of defense against major illegal | | | | Works Cited |
| activity, such as bribery, money laundering, and terrorist | | | | Boodoo, Maria F. and Crystal F. (2007). Peering into the |
| financing” (Boodoo, 2007). The article goes on to | | | | Fog The Emerging |
| talk about how orginally people thought the | | | | Consequences of Sarbanes-Oxley. Pennsylvania CPA |
| Sarbanes-Oxley Act would put stress on | | | | Journal. 78(1), 36-39. |
| company’s staffs. The article however says, | | | | Nolan, Sean (2003). “Planner: Calculating Costs of |
| “The supply gap in experience auditors and | | | | Sarbanes-Oxley Compliance” |
| accountants, accentuated by the compliance demands | | | | Retrieved 4/28/08. |
| of the Act, is prompting public accounting firms and | | | | |